Thursday, 27 July 2017

Positivity Surrounding Lloyds’ Return to Private Ownership Evaporates

In today’s post, the focus will be on Lloyds Bank which, if
we look back into the archives of Financial
Regulation Matters, is proving to be a consistent source of newsworthy
stories. Back in February 2017, when the largest U.K. banks were declaring
their financial results for the previous year, we discussed how Lloyds’ results
were somewhat of a ‘silver
lining’ in amongst a whole host of poor results from their competitors. Then,
on the basis of this positive
rhetoric that was beginning to surround Lloyds, we looked at how the Bank’s
return to private ownership caused neoliberals to rejoice at the process of
the state providing support but the supported entity eventually returning to
private ownership. Yet, staying in the archives, we can see that all is not
what it seems. We discussed how Lloyds’ exposure
to Payment Protection Insurance (PPI) claims was not over, and also how the
bank has been handling the HBOS compensation situation particularly
poorly. In this post, the focus is on how these two negative elements have
been developing recently, with both inferring that the success story of Lloyds’
return to private hands was a very short success story indeed.

The first component of the post – PPI claims – comes on the
back of some positive news for the bank. It was reported today that the bank
has reported its largest half-year profit in over 8 years, with its rate of
profit rising by 4%
to £2.5 billion, although this was below
City expectations. However, this news was accompanies by the news that the
bank has set aside a further £700 million to compensate people who had been mis-sold
insurance policies, on top of an extra £283 million to compensate those who
were ‘mistreated’
whilst in mortgage arrears. This extra billion pounds, which takes the bank’s
total outlay so far to an incredible £18 billion, has been designated to cover ‘reactive
claims’ which the bank expects to number around 9,000 per week in the
run-up to the August 2019 deadline for complaints. Yet, the Telegraph reports that the bank, in
addition to this £1 billion, have put aside a further £540 million for ‘misconduct
charges’ which, according to the newspaper, contains £100 million to
compensate the victims of the HBOS fraud. The last we time the fraud was
discussed here in Financial Regulation
Matters, we discussed how Lloyds had been criticised
for failing to meet its self-determined deadline to compensate the victims,
with only one victim being compensated so far. However, that particular
component had a new development recently, one which will likely see the saga
extended.

With reference to the HBOS fraud and the compensating of the
victims, we have discussed how the British TV personality, Noel Edmonds, is
leading the public
charge against Lloyds for the compensation process, after his company had
fallen foul of Scourfield’s fraud. Yet, Edmonds’ claim for more than £70
million seemed at odds with Lloyds’ estimates of a total compensatory fund of £100 million. On Tuesday, Edmonds raised
the stakes by increasing his claim to £300 million, stating that ‘I
am advised that given the trajectory of the businesses in the period before the
criminals destroyed Unique Group and my other commercial interests, £300
million is actually a conservative figure’. Whilst this development
seemingly extends the collision course that the two parties are on, further revelations
from Edmonds suggest that Lloyds’ wish of ‘moving on’ from their recent
troubles may have to wait a little longer. Edmonds added that his legal team ‘now
have documentary evidence to support the view of Thames Valley Police, the
Judiciary, and the CPS, that the HBOS criminality extended far beyond the “Reading
6”’, with Edmonds continuing that ‘this
explains why Lloyds created the secretive review process in an attempt to limit
their liability to a very small number of victims’. If Edmonds’ claims are
true, particularly in relation to obtaining documentary evidence, then it is
likely that Lloyds’ internal review will not count for much – there will need
to be state-level investigations; Edmonds’ proclamation that the process is
like ‘trying to plug an active volcano with a cork’ will hold true if this supposed
evidence comes to light. Furthermore, if
this evidence has been obtained, it is important that Edmonds pursues the case
in the courts instead of settling because, with Lloyds
promoting itself as the bank for SMEs and Edmonds insisting that the
problems that cumulated in Reading are actually systemic, it is important that
the true nature of the bank is revealed before other SMEs are potentially
damaged.

The bank was lauded for being the first to return to private
ownership after being in receipt of tax-payer funds, but this demonstrates the
sentiment developed by neoliberals within society. The real issue is that this
bank is being proven, on a weekly basis now it seems, to be inherently
transgressive, with billions upon billions of pounds having already been spent
to compensate those whom they have harmed, and with many more billions still to
be spent. If we remove ourselves from the short-term narrative that seems to
keep everything and everyone in their place, then surely the cultural processes
that facilitated such widespread transgressions still remain – how could they
not? What, in reality has changed since the Crisis? In reality, all that has
changed is that the environment surrounding the bank is not as facilitative as it was in the lead up
to 2007; that culture still remains, and that culture is demonstrated in the
bank’s awful handling of the HBOS compensation. Edmonds would likely accept a
settlement that met his demands if the situation arose, but the opportunity to
examine the inherent culture of this massive bank would be more beneficial for
society; whether that comes to pass is a different story entirely.

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